Question

Do It! Review 8-4 The fastener division of Southern Fasteners manufactures zippers and then sells them to customers for $7.72 per unit. Its variable cost is $3.47 per unit, and its fixed cost per unit is $1.49. Management would like the fastener division to transfer 12,100 of these zippers to another division within the company at a price of $3.47. The fastener division could avoid $0.31 per zipper of variable packaging costs by selling internally. Determine the minimum transfer price. Assuming the fastener division is not operating at full capacity. (Round answer to 2 decimal places, e.g. 10.50.) Minimum transfer prices Assuming the fastener division is operating at full capacity. (Round answer to 2 decimal places, e.g. 10.50.) Minimum transfer prices Click if you would like to Show Work for this question: Open Show Work LINK TO TEXT Question Attempts: 0 of 3 used SAVE FOR LATER SUBMIT ANSWER

Answer 1

a.If not operating at full capacity, no additional fixed costs will be incurred

Minimum transfer price = Incremental cost

= $3.47-0.31

= $3.16 per unit

Or 3.16*12,100 = $38,236

b.If operating at full capacity, minimum transfer price = Selling price -costs avoided

= $7.72 – 0.31

= $7.41

Or $89,661